Medical Device Daily National Editor
NEW YORK – The sky isn't falling – at least not for healthcare, or at least not very far.
And Medical Device Daily's fairly certain prediction for the Piper Jaffray Health Care Conference is that this is likely to be the oft-repeated take-away from the 20th in this series of sessions, frequently used by investors to foretell prospects for the coming year, this one at The Palace Hotel in Manhattan.
The opening of the conference Tuesday came on the heels of what many already suspected: that the U.S. has been in a recession for a full year, those pronouncements coming with the imprimatur of an "official" assessment. And the country's current economic morass is here forming the basis of repeated questioning of the dozens of company presenters at the conference. Just how will it impact them?
This downturn, "is going to effect us, but not right away, and not as dramatically as people are afraid," Jim Tobin, president/CEO of Boston Scientific (Natick, Massachusetts), told Medical Device Daily, following his kickoff presentation in one of seven ongoing "tracks" of the meeting.
And in that presentation, he offered a rosy picture of potential growth for the company, driven by a variety of new product roll-outs promised during the coming year and a slowly rebounding drug-eluting stent market.
Following Tobin's presentation, Mark de Raad, executive VP and CFO of Masimo (Irvine, California), put a much more positive spin on the company's positioning in the environment, because of the razor/razor blade model that the company employs.
In both cases, these soothing projections were based on a continuing bottom-line driver for the device sector: innovation, which pushes new products into the market.
Tobin spent a good bit of his presentation – primarily answering questions pitched to him by the session moderator – describing new product opportunities, and saying: "The thing that is most interesting at this juncture is that finally, after 2-1/2 years, we've started to see why we bought Guidant in the first place," a move questioned by many in the industry that saddled Boston Scientific with enormous debt.
The 2-1/2 years reference points to a regulatory morass faced by the company: FDA concerns with its manufacturing processes, serving to hold up many new product approvals.
While the agency's letters of concern haven't yet been lifted, Tobin suggested this is likely to pass and allow a great many approvals next year, with more than one-third of 2009 revenues expected to come from newly released products.
He especially focused on market prospects for the company's new Cognis cardiac resynchronization therapy defibrillator (CRT-D) and Teligen implantable cardioverter defibrillator (ICD), which the company says provides a range of new options for heart failure patients for sudden cardiac death.
The company did manage to win FDA approval for these technologies in May (MDD, May 19, 2008).
Rollout of the Cognis system, Tobin said, "has gone very, very well. It's a product that everybody talks about."
Billing Cognis as a "platform system," he said (a la frequent unveilings of computer versions): "We can introduce the product several times. It's a platform that we now have that will continue to move our [cardiac rhythm management] leadership in the market," to majority leadership.
He also addressed the stent market, over the past two years considerably unsettled, and the company's opportunities there.
"The shift between bare stents and coated stents was a one-time event," he said. "The market itself is solid; we'll do well with a range of products."
Tobin said that Boston Scientific has "aspirations" for 51% market share in stents, but that its cardiac rhythm management (CRM) business "will be the real engine of top-line and bottom-line growth ... That's why you see so much focus on CRM."
Just as he downplayed the impact of current economic turmoil in the U.S., Tobin glossed over any real impact by a new U.S. president and a heightened focus on healthcare reform.
While he acknowledged "a better chance now than there's been in 30 years, that some meaningful change could happen ... the effect on our business is likely to be neutral. Our prices aren't visible to the government directly. The impact will be fairly minor."
For Masimo, de Raad admitted that the current economic environment is "stressful," but that it may actually favor the company's model, since it provides its systems (the "razor") to hospitals for free, and then thus gains a continuing revenue stream from sale of disposables (the "blades").
de Raad described the company's growth as coming in two phases or "waves," via two major technology developments "that have allowed us to get to where we are today": its SET pulse oximetry (the company frequently proclaiming its inventorship and initial promotional success with this technology), and its new Rainbow technology for continuous measurement of total hemoglobin.
He said that Rainbow will become the company's "next major opportunity," built on developments over the last four years.
The company won FDA clearance for Rainbow this past May (MDD, May 15, 2008), and de Raad said the company projects market rollout in 1Q09, an "objective and timeline we're marching toward."
He described the Rainbow system as a "handheld carbon monoxide device – something we're very excited about, and will grow very aggressively."
Perhaps more important, he said that the product moves Masimo beyond its historical focus on the critical care market.
While you may have a pulse-ox device put on your finger in the physician's office, these, he told MDD, are stripped-down versions of Masimo's technology used in the critical-care setting.
Rainbow, however – with sensing via a device also clipped onto the finger – is designed for in-office use, and de Raad said that the real-time, in-office measurement of total hemoglobin will become very important to general physicians and cardiologists.
He quoted analyst estimates putting this sector "in the range of $600 million-plus opportunity, and depending on how extensive you are in your models, much more than a billion dollars. We obviously believe this is a huge opportunity for us in a physician's office arena."
de Raad said Masimo will expand its sales force from 125 to a "target" of 200, and that two-thirds of these new hires "will come internationally – that's a major focus for us."
He also issued a not very thinly veiled legal challenge, and warning, to competitors. Masimo, he said, is continuing "to speak with ... significant players in the industry" that he accused of violating "certain parts" of the company's technology.
Measurement of total hemoglobin "is a very interesting technology, not only for Masimo but for many of these players as well," de Raad said. "We are very clear about our desire to continue to protect our intellectual property."